Taxing times


            The government’s planned deficit reduction strategy rested on a large increase in tax revenue. The June 2010 budget set out to increase annual tax revenue by £177bn in 2014-15 compared to 2009-10. The Coalition VAT increase added to the outgoing Labour government Income Tax and National Insurance increases were expected to do the job, aided by good economic growth over the ensuing years. This would allow the Coalition to raise current spending by £90 billion a year in cash terms over the period, and cut the deficit substantially.

            Mr Osborne’s third budget, two years into the Coalition government, aims to raise tax revenue by £154 billion a year in 2014-15 compared to 2009-10, £23 billion less than the original proposals.  A bit of this fall is for the good reason that the second and third  budgets have brought some Income Tax cuts to standard rate taxpayers through the further increase in the threshold. The rest of the shortfall is the result of two other trends.

 The first is slower growth, meaning less revenue from a less buoyant economy.  The second reason is the falls in revenue brought on by higher tax rates.  The latest Treasury forecast now assumes that self assessment income tax will fall by 10% this year compared to last year, despite the higher inflation and growth which would normally increase it. The higher 50% rate is having an adverse impact. The Treasury also now forecasts a fall of almost 10% in the Capital Gains Tax receipts next year, as we feel the full effects of the higher 28% rate, despite the good gains on London property and many business assets since the market bottom in 2009.

                 The government’s study of the 50% rate argues that the impact of the 50% tax could be negative, but their best estimate is that dropping the rate to 45% would lose the Treasury just £100 million in tax income. They rightly hedge their figures around with many uncertainties.  They also have errors in their report – for example Chart 5.3 tells us that only 250 people in the UK had incomes of over £150,000 in  2010-11, when it must have been many times that. They show that the incomes of people on £150,000 a year or more fell by 25% in 2010-11, which implies a very large loss of revenue. As the official forecast is for a 10% fall in self assessment revenue we must assume that the fall comes from this sharp drop in top incomes, offset by some gains on lower incomes.

                 They show that the mean highest rate for the G7, the G20 and the EU 27 is below 40%. The UK was tax competitive when the government first cut it to 40%, but has long since been overtaken by the rest in the race to attract talent and enterprise.

                  This budget does not forecast any further economic weakness, and estimates that total borrowing over the five years will come out a bit lower than the high figures of the Autumn Statement 2011. It still leaves the UK state adding £528 billion to net borrowing over the planned five years of this Parliament despite the credit of £28 billion of Royal Mail pension assets. The Chancellor has adjusted the increase in spending down a little, from an extra £90billion in Year 5 to an extra £86 billion. I think we should ignore Table 2.3 of the Red Book where it says total public spending will be just £733 million, as I think they should have put “£ billion” rather than “£ million” at the top of the table.

                 The immediate politics of the budget are likely to revolve around the treatment of pensioner incomes and the reductions in tax credits, which offset gains being made for some through raising the tax threshold. Assessment of the longer term budget judgement will rest heavily on whether the various measures proposed to boost growth do do just that.  We will return to that story another day.


This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.


  1. lifelogic
    Posted March 22, 2012 at 6:19 am | Permalink

    This budget did much to continue the governments policy of suppressing growth and jobs through over taxation and an over large state. The few good points are the slight reductions in corporation tax (but not alas employers NI) and the new enterprise investment scheme limits and the new seed EIS.

    All the rest was back door tax increases such as the removal of child benefit for those on over £60,000, yet another broken promise by Cameron and counter productive increases in stamp duty turn over taxes.

    Osbourne in the budget said that “aggressive tax avoidance is morally repugnant” – no true conservative should think that. The tax payer will, almost certainly, spend (or invest) the money far better than the state, investing wisely is clearly in the interests of all. Aggressive tax avoidance should not be needed in a sensible tax system.

    Things real conservatives think are really morally repugnant are:

    Taking huge amounts of peoples money off them, in high taxes, and wasting it on the PIGIS & propping up the EURO, the EU, green nonsense, HS2, QUANGOS, transfers to the feckless and the many other madcap government schemes.

    Keeping 50% in place (for yet another year) when it is clearly in no ones interests and destroys growth and peoples jobs.
    Breaking pre-election promises (cast iron or otherwise) on the £1M IHT limit, child benefits, the EU, and attacking private sector pensions.
    Seeking election on a false electoral prospectus.

    These really are really repugnant.

    • lifelogic
      Posted March 22, 2012 at 7:02 am | Permalink

      Also Osborne and his advisers are not stupid. They must know that “renewables” do not really work and are a total waste of money. He must know that shale gas supplies, other fossil fuels and nuclear are by far our best bets. He is clearly not prepared to say this however. I assume deterred by the politics and the green/Lib-Dem/BBC/school syllabus/quack science line which now has such political support among the voters who have little science/engineering knowledge or those who are paid to lie.

      Knowing this, (as he surely must do) is it not also rather “repugnant” to continue pushing these BBC type myths and wasting the tax payers money on pointless wind and PV subsidies?

      • Disaffected
        Posted March 22, 2012 at 9:46 am | Permalink

        How about the the increased contribution for Europe? Is this not repugnant in these austere times? Borrowing £45 million a day to give to the EU. How about mass immigration when there is not the infrastructure to cope? Is this not repugnant? How about the overseas aid being enshrined in law when the country has to borrow the money to give it away? Is this not repugnant?

        The Tories do not have the courage to make spending cuts, therefore tax those who have worked all their life and might have a little saved.

        Tory game is up. This is a Lib Dem socialist takeover that Cameron was willing to go belly up for.

      • uanime5
        Posted March 23, 2012 at 1:49 am | Permalink

        If renewables didn’t work then they wouldn’t generate several 5.7 GW of energy or 9.6% of the energy produced in the UK every year.

        • lifelogic
          Posted March 23, 2012 at 8:44 am | Permalink

          They do not work, in economic terms, the “green” energy costs far too much to generate and is anyway worth far less (as it is not produced when needed, or on demand) it also cannot be stored cost effectively.

          They work if you divert huge subsidy to them – which destroys far more jobs than it creates.

          • uanime5
            Posted March 23, 2012 at 7:58 pm | Permalink

            All energy cannot be stored efficiently, not just green energy.

            Also all power generation industries need huge subsidies.

          • lifelogic
            Posted March 24, 2012 at 8:58 am | Permalink

            Nonsense, electrical energy cannot be stored cost effectively, but coal, oil, hydro, nuclear & gas “fuels” can be stored and converted to electricity on demand.

    • Disaffected
      Posted March 22, 2012 at 9:41 am | Permalink

      A question of fact: Osborne is borrowing, spending and taxing more than Gordon Brown. Pensioners already hit by QE, low interest rates are now hit with another tax. Their crime? Being prudent and trying to look after themselves in old age.

      Welfare lifers get a 5.2% pay rise in a weeks time.

      I will not vote Tory again. UKIP for me without a question.

    • Susan
      Posted March 22, 2012 at 11:27 am | Permalink


      I really do not care whether David Cameron promised to keep child Benefit or not, in this age of over population we should not be paying anyone to produce children. Single people and couples with no children are paying for the education, health and services for other peoples children, that is enough. Having children is not an automatic right that the rest of society should have to pay for. There are people having children when they know they do not have the means to support them and expect the state to step in and pay. Indeed we have young couples working hard who cannot even afford a roof over their heads, why should they pay for other irresponsible people to have children. Single people are particularly disadvantaged in this way.

      You like to discuss green policies, well the only one worth anything is cutting the population which is eating up the World resources.

      It is time for the state to step back and make people more responsible for their own actions.

      • lifelogic
        Posted March 23, 2012 at 8:53 am | Permalink

        I do not think child benefit encourages people to have extra children very often, anyway the poor still get it. For the rich it is just, in effect, a small tax rebate on their huge tax bill. The encouraging thing is that as countries become more developed the populations tend to stop over reproduction.

        • Susan
          Posted March 23, 2012 at 3:14 pm | Permalink


          It didn’t work in the UK then, because we are a developed Country and our birth rate is going sky high.

          The rich should not get a tax rebate on their huge tax bill for producing children. Those without children earning much much less get no such rebate for all the money they pour into the health, education and services for other peoples children. On top of all this, single people and childless couples are expected to provide child benefit it is very unfair.

          I thought you were a person who advocated less state intervention and for the Government to allow people to keep more of their own money.

          Child benefit does encourage people to have more children, it is therefore a foolish policy to have on an island such as the UK which is overcrowded already.

          Over population is one of the most serious issues the UK will have to face in the future.

          • lifelogic
            Posted March 24, 2012 at 8:59 am | Permalink

            UK population is rising due to immigration in the main – not due to home grown fertility rates.

          • Susan
            Posted March 24, 2012 at 12:05 pm | Permalink


            I agree that immigration has increased the UK population. Therefore is it right that Government should retain a policy that not only encourages new arrivals as well as those already here to have many more children.

            You have not provided any valid reasons why the UK should keep what amounts to a Third World policy in a modern Country.

          • sm
            Posted March 24, 2012 at 8:50 pm | Permalink

            Some people also have different views of the number of partners and children they should have, the state sometimes accepts too much of the burden, without considering a reasonable boundary for state support to the parents.

    • Bob
      Posted March 22, 2012 at 2:09 pm | Permalink

      The clear message is that the UK doesn’t like savers, high earners or pensioners.

      You can buy the votes of the indolent with free handouts at the expenses of the working population, but it is not a sustainable economic model, as anyone from one of the failed communist states will no doubt attest. In China they say, “To Get Rich Is Glorious”, in the UK it seems to be something to be ashamed of and punished.

      • uanime5
        Posted March 23, 2012 at 1:51 am | Permalink

        In China most employers don’t earn more than 100 time their employees’ salary so the rich aren’t so despised.

        • lifelogic
          Posted March 24, 2012 at 9:04 am | Permalink

          The rich are only despised by the very very foolish with a chip on their shoulders. Why despise Rooney, Beckham, Tom Jones, Elton John or someone who wins the lottery? They do no harm and pay lots of taxes and lots of people enjoy what they do.

    • Bazman
      Posted March 22, 2012 at 7:40 pm | Permalink

      The tax payer will, almost certainly, spend (or invest) the money far better than the state, investing wisely is clearly in the interests of all.
      The crux of your fantasy. The trickle down effect, but billions of pounds are sat idle by corporations and many rich just buy more property or hide their wealth offshore. They will not spend any money on infrastructure or health care for the country for example. They say they will move abroad, but first they have to find a job and a company daft enough to pay them what they want, so they save up to threaten this.
      You basically believe in the horse and sparrow theory and that we are just the hired help. Ram it.

      • Susan
        Posted March 23, 2012 at 4:42 pm | Permalink


        Oh how I love your posts, they send me on a journey down memory lane, of when I lived on Council Estates. The Labour representative came round at voting time to collect the usual Labour vote, filled everyone with fire against the evil Conservates and then disappeared into the ether, never to be seen until next voting time. Nothing ever changed on the estates, nothing has even now, but still the same old rhetoric is rolled out and they still vote Labour. You see nothing needed to change because the Labour Party were sure that the vote would always be Labour. Of course you will tell me you are much more left than the Labour Party but its the same thing.

        Anyway here is the problem in your arguments. All that you say may have some value, however the Labour party tried it your way for 13 years. They spent in the public sector beyond what the Country could afford, they increased benefits substantially, they spent on all the services, put taxation up etc. In other words they made all the changes someone like yourself would approve of and left the Country in massive debt. Now to my knowledge there is only one way to cure debt in an economy and that is for it to grow and create wealth. In order for it to grow, people with money have to be encouraged to invest. These people will be the wealth creators, but circumstances on tax, regulation etc have to be right for them to want invest. So you see the Labour Party have left the UK completely at the mercy of the people you despise the most, the wealth creators, because they are the only ones who can get the UK out of the mess it is in.

        Ever thought of opening your mind to change.

        • Bazman
          Posted March 24, 2012 at 1:27 pm | Permalink

          Depends on what you would call wealth creation and wealth creators. Giving the money to idle rich is more destructive than giving money to the poor. At least they have to spend it.
          Doffing your cap to the rich is no help whatsoever and the abolition of regulations and employment rights does not mean more jobs and the job it does create are of no us to anyone or the state. You will not be doing one of these jobs thats for sure and any legislation you believe should be put forward fall down on this test. Creating China with British peasants is not real.

          • Susan
            Posted March 24, 2012 at 4:58 pm | Permalink


            Firstly what is your definition of rich? The reason I ask is that people who have worked their way up in a job and are earning high wages are being taxed very heavily. With loss of personal allowance, lowering of the 40p band and other punitive taxation they are paying their share.

            When it comes to the idle rich, nothing much will touch them. With wealth comes freedom and they just move out of Britain taking their wealth with them.

            The point I am making is that the UK has run out of options, the Labour party spent all the money leaving the UK totally reliant on trying to attract investment from wealth creators. They will only come here if the conditions are right for them due to competition from other low tax economies. Otherwise we cannot help the poor or pay for our services and a debt spiral will begin. Then the economy is finished.

            Living standards will drop for all ordinary people like us, there is no doubt about it until the UK gets to grips with its debt. The money is just not there to keep providing the standard of living people have become used to in the UK.

            Actually I am more concerned about the amount of skilled workers the UK is losing to other Countries at the moment more than I am the wealthy. They are being taxed far to highly and are moving away in droves. No business will come to the UK unless there is a skilled workforce. The Government has taken its eye off this particular ball. They should not have worried so much about the 50p tax as they should about reinstating the personal allowance for this group of people who mostly do not fall into the 50p band.

            So as I have said to you whether we like it or not, the UK is totally at the mercy of those with the money to be able to create the jobs and wealth in the UK to provide the growth for recovery. The socialist model was tried and I am afraid it failed.

          • Bazman
            Posted March 26, 2012 at 7:56 pm | Permalink

            Skilled peole are not being taxed to much they are not being paid enough by companies in this country. Many wages are the same as they where in the late 90’s. This is due to the companies themselves even when they where and are making massive profits refuse to pay a decant rate. Where do you think my expression of Ram it comes from? The polite middle class way would be to say. I’m terribly sorry I cannot help you for that price. The metal trades would tell you to ram it.

      • lifelogic
        Posted March 24, 2012 at 9:09 am | Permalink

        The tax payer will, almost certainly, spend (or invest) the money far better than the state. This is indisputably true in general just look at what governments do with it.

        When companies have cash it is usually in a bank and used by those banks to lend to others so it is not “sat idle” or even sitting idle as you suggest.

        Yes some one who works is “hired help” by definition what do you think they are?

        • Bazman
          Posted March 24, 2012 at 10:28 am | Permalink

          The banks are not lending as you say, so the money is idle. Would you know the difference between hired help, employee, or servant and even slave? You obviously do not. Therefore cannot be helped as it is not possible to educate pork as your grammar schoolteacher would say.

  2. colliemum
    Posted March 22, 2012 at 6:42 am | Permalink

    “The immediate politics of the budget are likely to revolve around the treatment of pensioner incomes and the reductions in tax credits, …”

    You’re right about that, John.
    The headlines in the papers will not make for happy reading over the breakfast coffee.

    I am looking forward (not!) to the spin which will be put on this by Tory politicians and think tanks. We all know what Labour will say …

    Here’s something those who think the granny tax is ‘fair’ might mull over: can pensioners move to another job which pays more? Can they increase their ‘earning’ prospects?

    If it isn’t fair for working families to be left with less than those living on benefits, after paying taxes on their wages and income, then how is it fair to pensioners to be left with even less than working families, to support immigrant families and others living on benefit who have not contributed a single penny?

    I look forward to all the arguments telling us that the granny tax is fair, equitable and having the treasury giving us £140 per week from next year is really generous because the jobseekers allowance is far far less …

  3. Alte Fritz
    Posted March 22, 2012 at 6:45 am | Permalink

    Perhaps the Treasury has cut staff numbers to the extent they can no longer proof read vital public documents?

    An ominous announcement was that relating to an general anti avoidance provision. This is surely leading to a situation in which one is compelled to pay as much tax as HMRC wish to assess irrespective of the actual statutory provision. If so, then not only is individual liberty further eroded by an interventionist state but foreign money faces a serious disincentive to settle in the UK.

    • lifelogic
      Posted March 22, 2012 at 9:56 am | Permalink

      Indeed the “general anti avoidance rule” GAAR just adds yet further complexity and generates more pointless jobs for tax lawyers, tax collectors and accountants as usual.

      • Bazman
        Posted March 23, 2012 at 9:19 pm | Permalink

        Indeed the “general anti avoidance rule” GAAR just adds yet further complexity and generates more pointless jobs for tax lawyers, tax collectors and accountants as usual.
        HELLO! Do I ever post in capitals? Idiot. My God!

      • sm
        Posted March 24, 2012 at 9:12 pm | Permalink

        Can you widen your view a little? A robust GAAR could focus on MNC’s first.

        (offers reference to a site highlighted alleged tax evasion by banks-ed)

  4. Martin Cole
    Posted March 22, 2012 at 6:45 am | Permalink

    I repeat my reply by Twitter-:

    So the always obvious question now looms ever larger – Why do you remain on the backbenches serving this wayward Coalition?

    • Disaffected
      Posted March 22, 2012 at 9:47 am | Permalink

      Tory back benchers need to change Cameron or I fear they will be history for a very long time.

      • BobE
        Posted March 22, 2012 at 8:35 pm | Permalink

        The budget was a definate suicide note for the Lib Dems.

  5. ian wragg
    Posted March 22, 2012 at 7:06 am | Permalink

    This non tory chancellor has just alienated the largest section of voters of which I am one.
    Where were the spending cuts, where were the growth measures???
    Hasn’t it dawned on Osborne that by keeping increasing taxes, the revenue drops?
    As thet tories continue to commit political suicide, the sooner we have an election the better.
    Boys doing mens jobs.

    • Disaffected
      Posted March 22, 2012 at 9:46 am | Permalink

      Here here.

    • Andy
      Posted March 22, 2012 at 9:53 am | Permalink

      Too true. WTF is going on with these people?

    • Epigenes
      Posted March 22, 2012 at 3:21 pm | Permalink

      I have joined the UKIP. The Conservative led coalition is just another mendacious construct of the Labour Party.

  6. stred
    Posted March 22, 2012 at 8:03 am | Permalink

    The increase in fuel duty in line with inflation is a tax on a tax(vat), on a stealth tax (inflation). And this is presented as generosity.

  7. alan jutson
    Posted March 22, 2012 at 8:22 am | Permalink

    So spending is to continue, borrowing is to continue, and we now have admitted that the deficit will not be Zero after this term of Parliament.

    Why does he not cut spending ?

    The freezing of tax allowance for Pensioners was a cheap shot, I can only hope that he will increase the personal tax allowance in the next few years to such a degree (to perhaps £12,000) that it should balance out before it really strikes.
    It certainly makes sense to have just one allowance for everyone (I would even include those on over £100,000 year) to make things more simple.

    Increasing stamp duty on houses over £2 million will once again create false levels of pricing.

    Who will now put a house on the market for £2,150,000 instead of £1,999,999.

    Why is this tax not stepped like Income tax, why the highest rate on the total price ?

    Whilst £2 million is way, way beyond my means, it is not a huge sum for many to pay for properties in London, or even elsewhere in the outer reaches.

    I agree with the raising of the personal tax allowance, the sooner we get to a stage where anyone on the minimum wage pays no tax at all, the better.

    I agree with lowering the 50 pence rate, although I have certainly never earned enough to pay it, the sooner it gets to 40 pence the better, but did the threshold rise for the 40 pence rate, did I miss it, or is it fiscal drag ?.

    • alan jutson
      Posted March 22, 2012 at 9:40 am | Permalink

      Just read in the papers that the 40% threshold has been reduced to catch more people in the higher tax bracket, is this really true ?……Madness.

      So it would seem we still have a spend, borrow, and waste policy, funded by tax increases.

      Where is the incentive to work our way out of it all, when Benefits for non workers will increase by 5.2%

      Obviously a further cut in corporation tax is good news, although a bit late given it should have been reduced to this level 2 years ago for last April, not the next but one.

      Me thinks true Tory voters will not be best pleased with this budget.

      Fuel tax still rises another 3 pence in August.

      Another opportunity lost.

      • Andy
        Posted March 22, 2012 at 5:04 pm | Permalink

        Yes its true, it’s to make sure that higher rate tax payers don’t gain from the raising of the personal allowance.

  8. Brian Tomkinson
    Posted March 22, 2012 at 8:29 am | Permalink

    Osborne is getting a bad press partly for allowing so much of his budget to be leaked apart from taking extra £billions from pensioners. Perhaps he isn’t quite as smart as he thinks he is. It serves him 4right if his clever schem has backfired on him. I expected nothing from this budget and as I become a pensioner this year I see I am seen as an easy target. Those of us who have been prudent and tried to provide for ourselves have been singled out by this government and their agents in the BoE. Inflation eating away at fixed earnings, interest rates effectively negative due to inflation and now singled out to pay more income tax.

  9. Robert K
    Posted March 22, 2012 at 8:32 am | Permalink

    Good that the top rate of tax is being cut, bad that it is delayed until 2013 and bad that nothing has been done about the loss of personal allowances over GBP 100,000 which leads to an effective marginal tax rate of 60% and is a major disincentive to aspiring professionals and higher ranking middle managers. Bad that indexation is being removed from pensions.
    I can sort of see it from Mr Osborne’s perspective – he feels hedged in the poisoned Labour legacy, by his coalition partners, and by events. But ultimately the problem is that the Tory leadership spent so much time in opposition trying to figure out what would be electorally appealing that they overlooked the key to recovery: a simple statement that Britain should become an enterprise economy, free from the shackles of European social diktat, with low taxes, limited regulation and a rational energy policy.

  10. A.Sedgwick
    Posted March 22, 2012 at 8:33 am | Permalink

    Borrowings forecast to go up by £367B in next five years with growth rates latterly at 3% – we shall see, sounds like more Brownomics.

    Simplification means combining income tax and N.I. ( not just the administration); simplification means a flat tax with all personal allowances removed; simplification does not mean singling out one of the least well off and vulnerable groups for personal allowances removal – that is a tax increase.

    Osborne is as wet as Cameron, reducing the rate to 45% is being “hung for a lamb”, remember the £1m tax relief on IHT, remember transferable married tax allowance. The child allowance restrictions remain a fiasco – it needs to be ended over a 20 year period starting from 06/04/2013 only paid to two children residing in this country, existing commitments honoured.

    This budget is another step along the road for PM Ed and more Conservative defectors to UKIP, no wonder Mr.Hilton is off to Hollywood.

  11. Bob
    Posted March 22, 2012 at 9:03 am | Permalink


    The Government seems to have abandoned deficit reduction as its priority. Net debt will now peak at 75% of GDP, some 44% higher than they inherited from Labour and borrowing will now be around twice the level they set out in 2010.

  12. Electro-Kevin
    Posted March 22, 2012 at 9:18 am | Permalink

    Hitting pensioners has a double effect:

    – it raises revenues from pensioners
    – it makes younger people adopt a live-for-today attitude and causes them to spend rather than save

    Is the grey vote not important to the Tory party anymore ?

    • Electro-Kevin
      Posted March 22, 2012 at 10:49 pm | Permalink

      Having said that I had in mind poor war veterans when I posted that comment.

      The pensioners I saw on C4 were the Baby Boomers kicking their heels at dance class.

      Not being funny but they did preside over the collapse of moral and social standards in the UK. A significant number retired at 50 on index linked state pensions.

      Their grandchildren are going to have to work until at least 70 (if they can get a job) – many of them in care homes on minimum wages.

      Pensioners (excluding the war generations) are going to have to take a bite of the sandwich too.

      Alas the grey vote will be a problem. Part of Nu Lab’s poisoned chalice.

      John Redwood for PM (even if, by wishing it, I’m like a turkey voting for Christmas)

  13. Andy
    Posted March 22, 2012 at 9:51 am | Permalink

    Why on Earth did the government not simply revoke the 50% tax rate the day after they got into power? It was clearly a turd left in the punchbowl by a departing Labour government.

    By keeping it and subsequently reducing it by 5% only they make themselves look very weak.

  14. Acorn
    Posted March 22, 2012 at 10:27 am | Permalink

    My trip to the post box just now, has confirmed that you have definitely lost the pensioner vote!!!

  15. Susan
    Posted March 22, 2012 at 10:29 am | Permalink

    What on earth were the Conservates thinking of when they decided to hit pensioners who are the most vulnerable people in our society. Instead of having the courage to make spending cuts George Osborne decides to take from pensioners. Utterly repugnant. I do not feel I can continue to vote for a party who would do this. Inflation has already damaged pensioners living standards without the Government deciding to lower it still further. Stop stealing from pensions and pensioners in general just because you think ordinary people in this Country have the audacity to live too long.

    Talking of spending cuts, when are we going to get some? All I see at the moment is continuous tax rises.

    Another point I wish to make is that George Osborne keeps saying all people will benefit from the rise in the personal allowance. May I point out that those earning just over 100,000 pounds do not get a personal allowance. These people mostly earn under or just over the 50p band and are some of the most skilled workers in the UK. They have been hit disproportionaly by the tax rises as the 40p band is lowered as well. You can gain as many new businesses as you please, but without skilled workers to run them, they will soon be gone.

    Furthermore I did not see the logic of taking the flak for lowering the 50p band unless it was to take it all the way down to 40p, 45p coming in next year seems pointless to me and pleases no one.

    • uanime5
      Posted March 23, 2012 at 1:59 am | Permalink

      Given that only 1% of taxpayers (300,000) are in the 50% tax band it seems that the majority of skilled workers won’t be affected by this tax rate.

      • Susan
        Posted March 23, 2012 at 8:50 am | Permalink


        If you read my post correctly before you decide to reply, you will note I do say these skilled workers earn under or just into the 50p rate. Therefore I am making reference to those workers earning just over the 100,000 pounds at which point the personal allowance is removed. These people form our top skill base in this Country and are being taxed far too much. My post was nothing to do with the 50p rate it was to do with the withdrawal of the personal allowance and the lowering of the band at which the 40p kicks in which makes tax very high for this group of people.

        Please read carefully before replying.

        • APL
          Posted March 25, 2012 at 10:42 am | Permalink

          Susan: “These people form our top skill base in this Country and are being taxed far too much.”

          Don’t be so sure Susan, a good many people earning over £100,000 are in the top echelons of the local authority hierarchy or the civil service, or in the Cabinet, not to mention the myriad of Quangoes or pseudo Charities ( that are able to pay such inflated salaries because they have latched their fangs into the public purse ) and our old fiend the BBC.

          As they make their living by extorting tax revenue. In actual fact they pay no tax whatsoever.

  16. Nick
    Posted March 22, 2012 at 10:58 am | Permalink

    Consider the median person on the dole. Lets say they get 12K in benefits (housing benefit included).

    2.5K in tax if they get a min wage job.

    So total for getting them back to work is, rounded up around the 15K mark, with the assumption of no help such as back to work schemes that cost money.

    So for a million back to work, that is a reduction in the deficit of 15 bn. Out of a deficit of 150 bn.

    So its either massive cuts, and that’s not happening now, or they come after your money. You’re going to be made poorer because politicians can’t control themselves.

    Politicians are to blame. They are the villains. They take collective responsibility for the mess.

  17. David John Wilson
    Posted March 22, 2012 at 11:07 am | Permalink

    The real worry for pensioners is the sting in the tail where in the budget speech the chancellor refered to the future merging of income tax and national insurance. One can only presume that this will lead to an increase in income tax rates that will hit savings interest, company and private pensions etc.

    • alan jutson
      Posted March 22, 2012 at 6:15 pm | Permalink


      “….Merging Income tax and NI….”

      Yes we have all wired that one, I wonder if savings interest will have in effect NI added to make a minimum rate of 32% tax on savings and of course pensions.

      One would hope that any Chancellor would have more commonsense than to include such, although commonsense seems in short supply.

  18. Robert Taggart
    Posted March 22, 2012 at 11:14 am | Permalink

    Good Budget all things considered.
    But, what about us scroungers with savings ? – not a word !

    Currently, certain benefits are reduced on account of claimants savings –
    £00.00 – £6,000.00 = no penalty.
    £6,000.00 – £16,000.00 = £1.00 per week deduction for every £250.00 over £6,000.00.
    Solution ? – how about a single limit, say £20,000.00 if feeling generous, or £11,000.00 for a compromise ?
    With a single figure to aim for – without penalty (£6,000.00 be but a pittance now) – this would leave no one in doubt about where one stands.
    Simples !

    • sm
      Posted March 22, 2012 at 12:25 pm | Permalink

      Depends if you have reached escape velocity?

      Options include spending it faster than you would normally to reduce you outgoings in the future. Energy efficiency or any advantageous feed in tariffs. Then pass to go and collect in our means tested paradise economy of disincentives, low pay and high withdrawals. Otherwise thank your god or serendipity you don’t need to go there (yet).

    • uanime5
      Posted March 23, 2012 at 2:05 am | Permalink

      At present anyone with £16,000 won’t receive any benefits so there’s no point in setting a single limit. Gradually reducing benefits is far fairer and easier to implement than a single cut off point.

      • Robert Taggart
        Posted March 23, 2012 at 11:22 am | Permalink

        @ uanime5.
        The problem with the current set-up whereby the penalties become greater the nearer to £16,000.00 you are, is one of confusion…
        does one loose more in benefits than is being earned in interest ? Currently ofcourse interest be anything but interesting !
        More to our point though -just the added complexity can be a disincentive to save. A single figure for savings would make things ‘crystal’ clear. No penalty up to this amount (amount to be decided) and no benefits above that same amount.
        The point of having savings ? – Peace of Mind – now then, how do you put a price on that ?!

  19. JimF
    Posted March 22, 2012 at 11:30 am | Permalink

    This is still a high tax budget from a high tax government.
    There is much talk of “the rich must pay more”. The world which is an oyster, and rightly so, for people who have managed to accumulate, through their own efforts, significant assets. Wars are fought for people to remain free from confiscation of their assets. What is the point of those, if the state confiscates most of them anyway?

    The so called “rich”, whom I’d define as those with just a little more freedom in aspects of their lifestyle than Joe Sixpack will pay income tax until it becomes silly to do so, and above 40% is silly, so I wouldn’t expect 45% to bring in more revenue. They will fund pensions until double taxation, in and out, makes it silly to do so. They’ll leave money in Corporations, large and small, while Corp Tax rates incentivise them to do so. They will buy London property at £5m until taxes and market trends turn their perception away from it being a good investment.

    Whereas I’d consider it a Labour or LibDem rule to maximise tax take, Conservatives shouldn’t be doing that. You should be maximising economic performance.

  20. sm
    Posted March 22, 2012 at 11:42 am | Permalink

    However we know this is at odds with top pay, having to pay the going rate and all.

    Why its impossible that the 45p tax rate will cost just £100m a year

    My thoughts , I suspect the main loss of revenue will come from unemployment of earners in the £40k to £100k range. These are likely to cause large drops in direct and indirect taxes. Income of the controllers (as distinct from a seperate legal entity) may fall in a recession but is mitigated by higher direct taxes. (40% to 50% is a 25% increase.)

    What about taxes on employment, NI reductions? and or elimination of the tax is simplification along with a general robust anti-avoidance rule? Its nothing to do with morals, its about having an effective & efficient tax law that works. Spending priority is political and should stay there.

    Where is the push for a review of land value tax?

    We should be more worried about unemployment, continued massive immigration and low wages, in a economy without competition, a high cost rentier UK of unaffordable house prices,rent,fuel and essentials and high local taxes unrelated to income.

    Unless we leave the EU and changes happen to the above, spending will increase, tax rises, or money printing and inflation follow.

    How will this increase employment, no mention on National Insurance?

    • uanime5
      Posted March 23, 2012 at 2:09 am | Permalink

      Leaving the UK won’t fix any of these problems as the companies that donate to political parties benefit from mass immigration (cheap labour) and high cost properties.

  21. Barbara Stevens
    Posted March 22, 2012 at 2:36 pm | Permalink

    This ‘Granny Tax’ will make the Tories rue the day they allowed this to happen. Its no good stating we won’t lose cash, of course we won’t but if our private pensions increase we may now pay more tax than we thought we would, having the higher rate frozen. In fact it is a cut, whatever one says. Taking from people who cannot continue to earn, or those who have already retired is mean, that’s how many see it. Taking from those who cannot really fight back. It stinks. Osbourne as taken, by 2015 – 3 billion off allowances for the aged, that’s what they would have had against pensions private and state, fact.
    I shall not vote Tory now, nor for the Labour party, it will be UKIP for me and I shall encourage others to do likewise. Save for your old age, what for, to be taxed when you die and when you live, till you drop. What a country we have become. While we pay Rumanian’s child benefit for working here a few months, stay within the EU, most don’t want, pay women here to have children which is stupid while we are overpopulated. Osbourne could have closed the child benefit arguement in one go, and paid for the first two only, the rest the parents keep themselves. Its obvious he hadn’t the courage to do it. But he as the courage to rob elderly people of the small income they might have had which is now deminished by a frozen personal amount. I hope he sleeps well at night.

    • alan jutson
      Posted March 22, 2012 at 6:25 pm | Permalink


      Your feelings sum up the feelings of many who I have spoken to today.

      The granny tax (small raid though it may have been) may well be the straw that will break the conservative party’s back at the next election, as it shows a total disregard for a very large group of people who have attempted to do the right thing, and yet another slap in the face for those whos savings are being decimated by QE, and low interest rates.

      Doing the right thing, this phrase is now rather a sick joke.

      • JimF
        Posted March 22, 2012 at 9:39 pm | Permalink

        Let’s just all agree to redefine “doing the right thing” as voting UKIP. And persuading our host to move across.

        • Brian Tomkinson
          Posted March 22, 2012 at 11:31 pm | Permalink

          I would guess that the majority of contributers to John’s blog have now given up with the Conservatives and have decided to vote UKIP. I suppose it would be impolite and unkind to ask him to give us the opportunity to vote here.

          • APL
            Posted March 25, 2012 at 10:50 am | Permalink

            Brian Tomkinson: “I suppose it would be impolite and unkind to ask him to give us the opportunity to vote here.”

            You could invite him to join you.

    • Brian Tomkinson
      Posted March 22, 2012 at 6:38 pm | Permalink

      I am sure that many agree with your views and intention to ditch the Conservatives who have shown they are no better than Labour or the LibDems. They have had their chance and be found to be woefully inadequate. They may not care about the over 65s but when the elections come they will rue that stance.

    • uanime5
      Posted March 23, 2012 at 2:11 am | Permalink

      Maybe Osborne thought people wouldn’t object to him reducing people’s pensions as so many people supported him reducing public pensions. The public is reaping what they sowed.

      • alan jutson
        Posted March 23, 2012 at 8:30 am | Permalink


        He has not reduced pensions at all, he is simply getting more tax than he would have done from ALL Pensioners, both private, Public, and State than if he had index linked the allowance.

        • uanime5
          Posted March 23, 2012 at 8:00 pm | Permalink

          Which reduced the amount of money people get from their pensions because they lose more of it through taxation.

  22. Derek Emery
    Posted March 22, 2012 at 4:43 pm | Permalink

    Guido summed this up yesterday. To quote:-

    Osborne is spending more than Brown, borrowing more than Brown and taxing more than Brown. The official numbers revealed yesterday show that spending is still rising in real terms, there is no hope of for an “expansionary fiscal contraction” if there is no fiscal contracti0n. The national debt is still rising. The coalition government’s self-defined primary mission, to close the deficit by the next election, is on course for failure. As long as this obsession with fiscal neutrality and timidity towards cutting spending continues the tax burden will not be reduced, the debt will not be reduced and growth will flat-line.

  23. Alfred E PHILP
    Posted March 22, 2012 at 6:13 pm | Permalink

    Please answer one question “do you support the tax change for pensioners?”

    Reply: I want lower taxes for all, and a smaller spending increase

    • Brian Tomkinson
      Posted March 22, 2012 at 7:43 pm | Permalink

      How about a spending reduction? – or is there no politician in the land who isn’t hooked on spending our money?

      • Brian Tomkinson
        Posted March 22, 2012 at 11:16 pm | Permalink

        By your lack of reply, I take it that even you are in favour of spending more and continuing to increase our debt.

        Reply: As a regular reader I assumed you remmbered mny alternative spending profile which was £160 bn less over the five years.

    • BobE
      Posted March 22, 2012 at 8:47 pm | Permalink

      Politicians answer. Try again.
      “do you support the tax change for pensioners?”

      Answer properly John.

  24. BobE
    Posted March 22, 2012 at 8:45 pm | Permalink

    Osbourne is just a front man who was given a script to read. You could see the fear on his face when he was asked about the Granny Tax to fund a millionairs tax cut. He had no realisation of what had been done. A lib dem suicide note, and maybe a Cons one as well.
    The treasury is run by the civil servants and not by our leaders (sic!).

    • uanime5
      Posted March 23, 2012 at 2:13 am | Permalink

      I doubt our leaders objected to the Granny Tax as it doesn’t effect them, while giving millionaires a tax cut will ensure they get donations for the 2015 election.

  25. uanime5
    Posted March 23, 2012 at 1:44 am | Permalink

    Is it normal for the Chancellor to have 3 budgets in 2 years?

    Anyway the fall in tax revenue is mostly due to higher unemployment (mainly because the Government fired hundreds of thousands of public sector workers in the belief that it would create millions of private sector jobs), more people working part time, and the increased personal allowance. Also according to the HMRC the 50% tax rate is raising money, not losing it.

    Given that according to HMRC there are 300,000 people (1% of taxpayers) with incomes over £150,000 Chart 5.3 is clearly very wrong. Therefore the claims that there was a 25% fall in people earning £150,000 a year cannot be considered accurate, especially since HMRC doesn’t mention this occurring.

    John why do you insist that a fall in self assessment revenue shows that the 50% tax rate is harmful when you have no evidence to support this? A fall in self assessment revenue is more likely to be due to a large number of self-employed people closing down their businesses or working less time in their own businesses due to the bad economic conditions, than the effects of the 50% tax rate.

    The UK doesn’t attract talent and enterprise because scientists and engineers are very poorly paid in this country. By contrast we attract senior bankers because we pay them several million a year. Fixing this problem is more likely to help the UK then giving the wealthy a tax cut.

    Personally I don’t feel that the Government will deliver growth simply because they’re more focused on promoting party ideology and pandering to the wealthy than fixing the problems in the UK. I predict sluggish growth, rising unemployment, rising welfare and healthcare costs, and Labour coming back to power in 2015.

    Reply: It is normal to have an annual budget in March. There was an extra one following the last General Election as the new government wished to make changes in year.
    Top tax rate incomes are down 25%, that’s why I think the self assessment tax decline stems from the 50p rate.

  26. Lindsay McDougall
    Posted March 25, 2012 at 1:45 am | Permalink

    Now that the budget has been delivered, it is clear that raising the minimum taxable income to £10,000 is to be financed by lowering the 40% tax threshold (and inflation will lower it even more). It is estimated that 15% of the working population will be paying that rate by 2015, the scheduled time for the next General Election; it will be a rather higher % in London and the Home Counties.

    If I were an unscrupulous UKIP member, I might slip a leaflet through every door in London and the Home Counties headed “Did you know that the standard rate of income tax is now 40%?”. Dark propaganda and less than half true but you would have a hard time responding to it. UKIP’s flat tax might look attractive.

    Now the child benefit restrictions are known, we can compare the tax and benefit treatment of households with two incomes of £30,000 with that of households with one income of £60,000, the latter being more or less essential if you have three children or more. The former household has low income tax and full child benefit; the latter has high income tax and no child benefit. In the old days, there was real castration of the Eunuchs attending court, then chemical castration was considered for persistent rapists, now it’s financial castration for people with above average fertility. It’s all grossly unfair and Mr Redwood and others know it’s grossly unfair.

    So will I vote Conservative at the next election? Probably, but without enthusiasm. It will be a case of:
    “Always keep ahold of nurse
    For fear of getting something worse.”

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page